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Wise Investment Tips for Those Living on a Fixed Income

Just like any project you could take on, starting is always the tough part of investing. The required capital and the financial processes one has to undergo are intimidating for anyone, especially for someone who does not have abundant liquid income. To overcome the initial investment jitters, here are some valuable tips:

Setting the Tone

You have to objectively assess how much you can set aside from your income for uses other than your living expenses. Make sure that, once the said amount is locked in a certain investment for the prescribed period, it would not constrain your finances, and you still have on-hand funds for emergency spending. It is also worth noting ahead of time that, as someone who is making do with a fixed income, you should not invest at the expense of your entire savings.

If anything, it is also wise to plan now on what valuable assets you would rather spend your savings on before; one day, you get impulsive and splurge it on things whose value will not justify their price, further inhibiting you from attaining your investment goals. Only then can you narrow down the viable options.

Investment Profile

Once you have at least an estimated amount you can invest now, it is time to assess how long you can lock it in your chosen investment scheme. Go to a bank, an investment broker, or a financial adviser, and you will be asked the same question once you open an investor account. This pertains to your investment horizon, and it is important in drawing your investment plan.

Aside from being briefed on how long you will have to commit the amount and let the economy play its role in its rise and fall, it is important to know your investment horizon so you can aim for it to be longer once you earn a higher income. Although regular salary increases are the ideal setup for you, conditioning your mind to allot more and more of your funds for investments that have growth potential instead of temporary luxuries will work favorably for you eventually.

You have to remember that money has a time value, and you cannot reap its benefit unless you nurture it. Another basic concept you need a grasp of is your risk appetite or how much risk you are willing to assume on behalf of the institution you are placing your stakes in, a company that opened a portion of its stocks for public ownership, for instance. Another way to interpret is how willing you are to absorb the loss if the economy worsens.

This appetite is usually rated as either of the three: conservative, moderate, and aggressive. Entry-level income earners usually fall under the conservative category, and higher earners are either moderate or aggressive. The catch is the more risk-averse you are, sure you can guarantee money growth, but it will take time, whereas if you’re willing to ride the wave of uncertainty, constantly staying in the know of economic affairs and timing buy and sell orders accordingly, you can plow higher income margins.

Investment Product Ideas

investment plans concept

There are many investment options for fixed-income earners. Mutual funds and unit investment trust funds (UITF), which most banks or stock exchange brokers offer, may slightly vary in their modalities but still, both work to group assets or shares of different publicly-listed companies, including blue-chip ones to simplify investment diversification. Aside from making it convenient for you, putting your money in a diversified portfolio guarantees you the least amount of losses in case a certain industry is experiencing a downturn because, then, the other companies in your portfolio belonging to other industries will cushion the blow.

Government securities and bonds are also another safe investment option when you are just a beginner. Hence, they are less risky and will accrue in interest rather more gradually than private stocks. But, such interest will certainly add up if you maintain your investment for the long run.

Real estate is ever a lucrative investment. Of all worldly assets, the land is one of the few that only appreciate over time, but paying for it may leave a dent in the finances of average income earners. It is never too early to invest in it, though, as you can finance it through the help of an FHA loan or other loan arrangements.

Anyone can invest. It is just a matter of prioritizing your finances and initially knowing how much risk you can assume. Your needs will grow, better grow your money too, and it is possible only if you strategically distribute your eggs in several baskets.

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